If you're able to set money aside you need to make sure it's earning you a healthy return, explains Wellesley.
Leaving the television on standby. Forgetting to cancel void direct debits. Astronomical phone bills.
Every day we are all guilty of letting money leave our bank accounts that could otherwise be avoided.
Dipping into an overdraft at the end of the month, or during an emergency is commonplace.
However, UK banks have over two million customers stuck in their overdraft.
These scenarios can be fixed with financial advice and strict money management.
However, there are circumstances where your money isn’t even being wasted, it simply isn’t doing enough for you.
This is known as dead money.
Dead money
The slang term ‘dead money’ was conceived on Wall Street and refers to capital that does not earn a return for an investor.
Whilst many of us siphon money away into general savings or leave it sitting in our current account, the money is not generating any extra income for you.
Why not put your asset to work?
It is widely assumed that if you aren’t in debt, and have some money stashed away for a rainy day, that you’re comfortable financially.
Granted, this is not a bad position to be in. However, if your dead money could be earning you a return, wouldn’t you take the opportunity?
If any of your money is:
- Sitting in a low interest savings account;
- Stashed away as physical cash;
- Stored in your current account;
- Or invested in a stock or share that has decreased in value;
…then your money could be considered ‘dead’ as it is earning you little to no financial return.
How to rejuvenate dead money
If you feel that you may be in a position where your money could be working harder for you and bringing in extra revenue, there are easy options available.
Stocks and Shares ISAs
You can pay into one Stocks and Shares ISA per tax year and invest a maximum of £20,000 in 2019/20.
Typically, capital placed into a Stocks and Shares ISA is used towards property, shares or bond investments.
For those who want to be able to invest online, Wellesley will soon be offering an ISA eligible product.
Keep an eye on the Wellesley website and social media platforms for release updates.
As with any ISA Stocks and Shares product, your capital is at risk and you are not guaranteed interest payments.
If you are in anyway confused about ISAs, or want further advice, it is recommended that you contact a financial adviser prior to investing.
Premium Bonds
Premium Bonds are one of biggest saving products in the UK, despite many people thinking of them as outdated.
There are around 22 million people saving around £79 billion into them.
Although the prize rate did fall from 1.25% to 1.15% in May 2018 any winnings you receive are tax-free and, the more you save, the better chance you have of winning.
Premium bonds are popular because they present no risk to your capital.
The money you invest is completely safe, it is only the interest (any winnings) you have that could range anywhere from £0 to £1 million.
All the money you save in a Premium Bond is backed by the Treasury as money placed into Premium Bonds is lent to the Government.
Lifetime ISA
With the Help to Buy ISA closing its doors to new savers as of 30th November 2019, much attention is turning to the LISA; dubbed an option for anybody under 40 who is unsure of where to stash their money.
You can save up to £4,000 per year in a Lifetime ISA and the Government will add a 25% bonus on top every year until you turn 50.
So, if you save the full £4,000 one year, you’ll have £5,000 before interest.
It can be used against a first property or cashed in when you turn 60.
Regular current and savings accounts
It is easy to become lazy when it comes to your current and savings accounts. Usually, you will tend to have both with the same bank for ease.
Or, you could have been drawn in by initially high interested rates that drop to a much lower figure over time.
There is no reason why you can’t have your current account with one provider and a savings account with another.
Shopping around for the best return on your money and transferring accounts could enable you to garner interest on your savings risk-free.
Assessing finances for the future
There are a variety of different ways to make your money work for you.
Whatever level of risk you are most comfortable with, there are ways to make money with your money.
Essentially there is free money to be had and it could be as easy as clicking a button.
Spending a small amount of time assessing your finances and making sure they are giving you a return could benefit you long term.
This is a paid promotion from Wellesley. The views expressed in this article do not necessarily reflect those of loveMONEY.